SEC News Digest

Issue 2008-211
October 30, 2008

COMMISSION ANNOUNCEMENTS

Commission Meetings

Closed Meeting - Thursday, November 13, 2008 - 2:00 p.m.

The subject matter of the closed meeting scheduled for Thursday, Nov. 13, 2008, will be: formal orders of investigation; institution and settlement of injunctive actions; institution and settlement of administrative proceedings of an enforcement nature; adjudicatory matters; and other matters relating to enforcement proceedings.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551-5400.

RULES AND RELATED MATTERS

Investment Adviser Registration Depository Filing Fees

An order has been issued waiving, for nine months, Investment Adviser Registration Depository annual filing fees and initial set-up fees for investment advisers registered or registering with the Commission. The waiver will apply to IARD system fees due in connection with applications for registration and annual updating amendments filed from Nov. 1, 2008 through July 31, 2009. (Rel. IA-2806- October 30; Press Rel. 2008-259)

ENFORCEMENT PROCEEDINGS

In the Matter of Blue Angel Holdings Corp.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Blue Angel Holdings Corp., Administrative Proceeding No. 3-13207. The Order Instituting Proceedings alleged that eight Respondents each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

In the Matter of Lazard Capital Markets LLC

The Commission announced today the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions as to Lazard Capital Markets LLC (Order). The Order finds that from 2000 to 2004, the head of Lazard Capital Markets U.S. sales and trading desk, and two Lazard Capital Markets registered representatives, expensed over $600,000 in connection with providing compensation prohibited by Section 17(e)(1) of the Investment Company Act to certain traders of FMR Co., Inc.'s (Fidelity) equity trading desk. The prohibited compensation, which took the form of travel, entertainment, and gifts, included expense paid trips to Europe, the Bahamas, the Caribbean, Florida, and Napa Valley, California, often by private plane, and included meals and lodging at high-end restaurants and hotels. The Order further finds that Lazard Capital Markets failed reasonably to implement its policies with respect to supervisory review of its employees' provision of travel, entertainment and gifts by, among other things, failing to have reasonable procedures for monitoring the nature and extent of its employees' provision of travel, entertainment and gifts to Fidelity traders. As a result of the conduct described above, the Order finds that Lazard Capital Markets failed reasonably to supervise, within the meaning of Section 15(b)(4)(E) of the Securities Exchange Act of 1934, the head of U.S. sales and trading and the two registered representatives with a view to preventing their aiding and abetting and causing certain Fidelity traders' violations of Section 17(e)(1) of the Investment Company Act.

Based on the above, the Order requires Lazard Capital Markets to disgorge $1,817,629 in ill-gotten gains plus prejudgment interest of $429,379.04, and pay a civil monetary penalty of $600,000, to the United States Treasury. Lazard Capital Markets consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which it admitted. (Rel. 34-58880; File No. 3-13281).

In the Matter of Louis Gregory Rice

On October 30, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions as to Louis Gregory Rice (Order). The Order finds that from 2000 to 2004, Louis Gregory Rice (Rice), the head of Lazard Capital Markets equity sales and trading desk, failed to supervise two registered representatives under his supervision who expensed approximately $300,000 in connection with providing compensation prohibited by Section 17(e)(1) of the Investment Company Act to certain traders of FMR Co.'s (Fidelity) equity trading desk. The prohibited compensation, which consisted of travel, entertainment and gifts, included expense paid trips to Europe, the Bahamas, Florida, and Napa Valley, California, tickets to concerts, race car driving lessons and expensive wine, as well as contributing to expenses associated with one Fidelity trader's elaborate bachelor party. The Order further finds that Rice was aware of the nature and frequency of most of the travel, entertainment and gifts that the registered representatives provided and failed reasonably to respond to red flags indicating that certain of their conduct violated both Lazard Capital Markets policies and the applicable securities rules and regulations. As a result of the conduct described above, the Order finds that Rice failed reasonably to supervise, within the meaning of Section 15(b)(6) of the Securities Exchange Act of 1934, the two Lazard Capital Markets registered representatives, with a view to preventing their aiding and abetting and causing certain Fidelity traders' violations of Section 17(e)(1) of the Investment Company Act.

Based on the above, the Order suspends Rice from acting in a supervisory capacity for any broker or dealer for a period of six months, and orders him to pay a civil monetary penalty of $60,000 to the United States Treasury. Rice consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which he admitted. (Rel. 34-58881; File No. 3-13282).

In the Matter of Robert A. Ward

On October 30, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order as to Robert A. Ward (Order).

The Order finds that from 2000 to 2004, Robert A. Ward (Ward), a registered representative of Lazard Capital Markets, expensed over $200,000 in connection with providing compensation prohibited by Section 17(e)(1) of the Investment Company Act and Lazard Capital Markets policies to certain traders of FMR Co., Inc.'s (Fidelity) equity trading desk. The prohibited compensation included expense paid trips to exotic locations, lodging at fancy hotels, tickets to concerts, and gifts such as expensive wine. As a result of the conduct described above, Ward willfully aided and abetted and caused violations of Section 17(e)(1) of the Investment Company Act by certain Fidelity traders.

Based on the above, the Order requires that Ward cease and desist from committing or causing any violations, or any future violations, of Section 17(e)(1) of the Investment Company Act, and suspends him from associating with a broker or dealer, and from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company for a period of six months. The Order further requires Ward to pay a civil monetary penalty of $50,000 to the United States Treasury. Ward consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which he admitted. (Rel. 34-58882; File No. 3-13283).

In the Matter of David L. Tashjian

On October 30, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order as to David L. Tashjian (Order). The Order finds that from 2000 to 2004, David L. Tashjian (Tashjian), the head of Lazard Capital Markets' U.S. sales and trading desk, expensed over $350,000 in connection with providing compensation prohibited by Section 17(e)(1) of the Investment Company Act to a trader of FMR Co.'s (Fidelity) equity trading desk. The prohibited compensation, which consisted of travel, entertainment and gifts, included expense paid trips to the Bahamas, Florida and California, lodging at high-end hotels, expensive wine, and paying for expenses incurred at an adult entertainment establishment for the Fidelity trader's elaborate bachelor party. The Order further finds that Tashjian failed reasonably to respond to red flags indicating that two Lazard Capital Markets registered representatives within his supervisory authority also provided prohibited compensation, in the form of travel, entertainment and gifts, to certain Fidelity equity traders. Among other things, the Order finds that Tashjian was aware of the nature of the travel and entertainment the two registered representatives provided and failed reasonably to respond to red flags indicating that their conduct violated both Lazard Capital Markets policies and the applicable securities rules and regulations. As a result of the conduct described above, the Order finds that Tashjian willfully aided and abetted and caused violations of Section 17(e)(1) of the Investment Company Act by the Fidelity trader, and failed reasonably to supervise, within the meaning of Section 15(b)(6) of the Securities Exchange Act of 1934, the two Lazard Capital Markets registered representatives, with a view to preventing their aiding and abetting and causing certain Fidelity traders' violations of Section 17(e)(1) of the Investment Company Act.

Based on the above, the Order requires Tashjian to cease and desist from committing or causing any violations, or any future violations, of Section 17(e)(1) of the Investment Company Act, and suspends him from association with any broker or dealer, and from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company for a period of nine months. The Order further requires that Tashjian pay a civil monetary penalty of $75,000 to the United States Treasury. Tashjian consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which he admitted. (Rel. No. 34-58883; File No. 3-13284).

In the Matter of W. Daniel Williams

On October 30, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order as to W. Daniel Williams (Order). The Order finds that from 2000 to 2004, W. Daniel Williams (Williams), a registered representative of Lazard Capital Markets, expensed over $100,000 in connection with providing compensation prohibited by Section 17(e)(1) of the Investment Company Act and Lazard Capital Markets policies to certain traders of FMR Co., Inc.'s (Fidelity) equity trading desk. The prohibited compensation included expense paid trips to exotic locations, lodging at fancy hotels, tickets to concerts, and expensive gifts. As a result of the conduct described above, Williams willfully aided and abetted and caused violations of Section 17(e)(1) of the Investment Company Act by certain Fidelity traders.

Based on the above, the Order requires that Williams cease and desist from committing or causing any violations, or any future violations, of Section 17(e)(1) of the Investment Company Act and suspends him from associating with a broker or dealer, and from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company for a period of three months. The Order further requires Williams to pay a civil monetary penalty of $25,000 to the United States Treasury. Williams consented to the issuance of the Order without admitting or denying any of the findings in the Order, except jurisdiction, which he admitted. (Rel. 34-58884; File No. 3-13285).

In the Matter of Ragen Corp.

An Administrative Law Judge has issued an Order Making Findings and Revoking Registrations by Default (Default Order) in Ragen Corp., Administrative Proceeding No. 3-13220. The Order Instituting Proceedings alleged that seven Respondents each failed repeatedly to file required annual and quarterly reports while their securities were registered with the Securities and Exchange Commission.

The Commission today filed a civil injunctive action in the United States District Court for the Southern District of Florida against Andres L. Pimstein, The Bottom Line of South Florida, Inc. (Bottom Line) and Summit Trading LLC (Summit) alleging they conducted a $30 million Ponzi scheme.

The Commission's complaint alleges that from at least 2005 to April 2008, the defendants offered and sold more than $30 million of securities to at least 80 investors in at least five states, purportedly to fund an export business that Pimstein and his agents operated through Bottom Line and Summit. According to the complaint, Pimstein and his agents told investors that Bottom Line and Summit would use the proceeds from their investments to buy iPods and other personal electronics from vendors in the United States for resale to Ripley Corp., S.A., a Chilean company that operates one of the largest department store chains in South America. The complaint further alleges that Pimstein and his agents claimed Bottom Line and Summit had a competitive edge over other electronics suppliers because Pimstein was the cousin of Ripley's chief executive officer and had previously worked for Ripley.

The complaint alleges that, contrary to defendants' representations, they purchased very few electronics with investor funds and did not re-sell any electronics to Ripley. Instead, defendants operated a large Ponzi scheme by using newly invested funds to make principal and interest payments to existing investors. The defendants also paid commissions to the agents who solicited investors on the defendants' behalf. In addition, Pimstein used investor funds to pay his personal expenses. According to the complaint, in April 2008, the defendants' Ponzi scheme collapsed when the interest and principal Bottom Line and Summit were obligated to pay investors substantially exceeded the amount of new funds Pimstein and his agents were able to raise from investors. The complaint alleges that Pimstein subsequently confessed to local police that that he had operated a Ponzi scheme and admitted that Ripley never purchased any electronics from the defendants.

The Commission's complaint charges Pimstein, Bottom Line and Summit with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In its complaint, the Commission seeks permanent injunctions, disgorgement plus prejudgment interest and civil penalties against the defendants. Upon the filing of the Commission's complaint, and without admitting or denying the allegations in the complaint, Pimstein, Bottom Line and Summit consented to the entry of a judgment permanently enjoining them from violating the above-mentioned provisions of the federal securities laws. The judgment also orders the defendants to pay disgorgement plus prejudgment interest and civil money penalties, the amounts of which will be determined by the Court at a later date.

The United States Attorney's Office for the Southern District of Florida conducted a parallel investigation of this matter. Simultaneous with the Commission's announcement of this action, the United States Attorneys Office announced the filing of criminal charges against Pimstein alleging mail and wire fraud. The SEC also acknowledges the assistance of the Miami Beach Office of the Federal Bureau of Investigation and the Superintendencia de Valores y Seguros of Chile (SVS) with this investigation. The staff's investigation is continuing. [SEC v. Andres L. Pimstein, The Bottom Line of South Florida, Inc. and Summit Trading LLC, Case No. 08-23024-CIV-GRAHAM (S.D. Fla.)] (LR-20794)

Securities and Exchange Commission files Motion to Authorize Distribution of Funds to Victims of the Fraud Perpetrated by Adelphia Communications Corp. ("Adelphia") in Accordance With Procedures Adopted by U.S. Department of Justice in Connection With Adelphia Victim Fund

The Commission announced that it has filed a motion with the U.S. District Court for the Southern District of New York overseeing its civil enforcement action against Adelphia Communication Corp. for an order authorizing the distribution of $95 million plus accrued interest (the "SEC Fund") held in the court's registry to victims of the Adelphia fraud in accordance with the procedures adopted by the U.S. Department of Justice with respect to the Adelphia Victim Fund. The SEC Fund consists of monetary recoveries obtained by the Commission in its civil enforcement actions against Deloitte & Touche LLP, Scientific-Atlanta, Inc., and Motorola Inc., in connection with the Adelphia matter. The case caption is SEC v. Adelphia Communications Corp., et al., Case No. 02-CV-5776 (PKC) (SDNY).

The $715 million Adelphia Victim Fund was established pursuant to a global settlement between Adelphia, the Department of Justice, the Commission, certain members of the Rigas family, and others, and is being administered by a special master appointed by the Department of Justice. The Adelphia Victim Fund, which was devised in consultation with the Commission staff, provides for the pro rata distribution of the fund to eligible petitioners, taking into account payments made to victims from other sources. More information about the fund can be found at www.adelphiafund.com.

Objections to the Commission's motion, if any, must be filed with the court and served on the Commission staff by November 21, 2008, at the addresses set forth in the notice of motion. [SEC v. Adelphia Communications Corp., et al., Civil Action File No. 02-CV-5776 (PKC) (SDNY)] (LR-20795)